By Christin Evans, HANC Board
In the United States, private for-profit banks have evolved the products they offer and the customers they serve to maximize profits leaving significant gaps in products and services for San Francisco’s low income workers, affordable housing projects, and small businesses. While the Bay Area has a relatively large number of community banks and credit unions, these institutions lack the scale and reach to adequately meet the needs of this vastly underserved market.
The San Francisco Reinvestment Working Group convened by LAFCO (Local Agency Formation Commission) earlier this year has been writing the business plan for a public bank to seek to create the foundation for a municipal bank which has a primary goal of serving its community over the interest of profits. The Working Group, given a mandate by a unanimous vote of the Board of Supervisors last year, has been developing a plan to use city assets currently stored in private market banks to capitalize a municipal benefit corporation or private bank within the next few years.
The San Francisco Public Bank would have the aim to fill gaps in current lending to affordable housing projects, small businesses, particularly women and POC (People of Color) owned, and organizations addressing the effects of climate change. This would make significant investments in San Francisco’s primary development needs in lieu of private banks which currently make significant investments with city funds outside of the region.
The case of two different states:
The difference a public bank can make for its community was recently revealed during the pandemic. California and North Dakota had two very different experiences in distribution of federal PPP loans to small businesses. At the height of the pandemic, Wells Fargo ran into credit limits set by banking regulators leaving many small businesses in lengthy queues waiting for loan applications to be processed. The number of loans per capita made in Round One in North Dakota was nearly double the amount in California. The reason why? The Bank of North Dakota, a 100+ year old public bank (https://bnd.nd.gov/public/) was able to quickly disseminate loans to community banks which had relationships with small businesses in the communities they served. According to the analysis of the Washington Post, North Dakota, the only state with a public bank, beat out all other states by a large margin in Round 1 of PPP distribution, saving numerous jobs and preventing small businesses from shuttering.
The SF Reinvestment Working Group will be reviewing drafts of the business plan for San Francisco’s own public bank starting in February 2023 at their monthly meetings. Their meetings are open to the public and accessible via streaming online. For more information about past and future meetings of the San Francisco Reinvestment Working Group developing a business plan for a San Francisco public bank visit: https://sfgov.org/lafco/reinvestment-working-grouphttps://sfgov.org/lafco/reinvestment-working-group